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Deal Reached on Ex-HealthSouth Official

Jul 8, 2003 | AP

A 12th executive at HealthSouth Corp. agreed to plead guilty as prosecutors said Tuesday their probe of a massive accounting scam had expanded to the company's treasury department.

Jason Brown, vice president of finance, was charged with conspiracy to commit securities fraud in a scheme that has the medical services giant struggling to avoid bankruptcy.

Prosecutors said Brown, 34, was cooperating with investigators, just like the 11 previous executives who pleaded guilty. An attorney for Brown did not immediately return a telephone call seeking comment.

U.S. Attorney Alice Martin said the government's probe was moving from HealthSouth's accounting department into its treasury department.

``We will continue to widen the net of our investigation to reach all those individuals who participated in this fraud,'' Martin said in a statement.

The government has accused HealthSouth of overstating earnings by some $2.5 billion to make it appear the Birmingham-based company was meeting the forecasts of Wall Street analysts.

The Securities and Exchange Commission filed suit against HealthSouth in March, when a parallel investigation by the Justice Department resulted in the first of a string of plea agreements by one-time HealthSouth executives.

All five of the company's chief financial officers have pleaded guilty, and chief executive Richard Scrushy was fired. Scrushy's lawyers have said they expected him to be indicted, but Scrushy has denied any wrongdoing.

Prosecutors said Brown, who assumed his job in May 2000, was accused of falsifying documents in a scheme that included HealthSouth's failure to report its sale of $27 million worth of stock in another company in 2001. The stock allegedly was kept on the books, inflating HealthSouth's assets.

Acting at the direction of senior officers, Brown and others also changed records to hide year-to-year revenue declines at HealthSouth facilities for the third quarter of 2002, prosecutors said.

Brown faces a maximum penalty of five years in prison, a $250,000 fine and forfeiture of any gains from the scam. He also was fired.

``As people plead guilty they are terminated from employment,'' HealthSouth spokesman Andy Brimmer said.

Brown's plea agreement was announced as the company scheduled meetings with creditors in a bid for more time to avoid bankruptcy.

Meeting with investors in New York on Monday, the company said its core business remained solid and predicted revenue of $4.1 billion over the next year.

HealthSouth calls itself the largest U.S. provider of outpatient surgery, diagnostic and imaging and rehabilitation services. The company has nearly 1,700 facilities and 51,000 employees in every state and abroad.

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